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ehidna [41]
3 years ago
12

In 2011, Edwin Ryan bought 100 shares of a listed stock for $5,000. In June 2014, when the stock’s fair market value was $7,000,

Edwin gave this stock to his sister, Lynn. No gift tax was paid. Lynn died in October 2014, bequeathing this stock to Edwin, when the stock’s fair market value was $9,000. Lynn’s executor did not elect the alternate valuation. What is Edwin’s basis for this stock after he inherits it from Lynn’s estate?
a.$0
b.$5,000
c.$7,000
d.$9,000
Business
1 answer:
lara [203]3 years ago
4 0

Answer:

B) $5,000

Explanation:

Under Section 1014 (a) the basis of any property acquired by a decedent (Lynn) through a gift within 1 year of death and passed back to the donor (Edwin) due to the decedent's death, will be adjusted to the basis immediately prior to the death.

In other words, since Lynn died within 1 year of receiving Edwin's gift, Edwin's basis will be the same as Lynn's basis.

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2 years ago
Johnny Cake Ltd. has 30 million shares of stock outstanding selling at $40 per share and an issue of $40 million in 8 percent, a
erma4kov [3.2K]

Answer:

WACC = 0.16637 OR 16.637%

Explanation:

WACC or weighted average cost of capital is the cost of a firm's capital structure which can comprise of debt, preferred stock and common equity. The WACC for a firm with only debt and common equity can be calculated as follows,

WACC = wD * rD * (1-tax rate)  +  wE * rE

Where,

  • w represents the weight of each component based on market value in the capital structure
  • r represents the cost of each component
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To calculate WACC, we first need to calculate the Market value an cost of equity.

The market value of equity = 30 million shares * $40 per share

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The cost of equity can be found using the formula for Price today (P0) under constant growth model of DDM.

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40 * (r - 0.07) = 4

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r = 0.17 or 17%

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Total MV of capital structure = 38.6 + 1200 = 1238.6 million

WACC = 38.6/1238.6  *  0.08  *  (1-0.33)  +  1200/1238.6  *  0.17

WACC = 0.16637 OR 16.637%

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